You might argue that we haven't seen that tactic lately, but we're going to see a big example of it next year-- when Blizzard releases Death Knights in the next WoW expansion, we've already been told that they'll start at a higher level. The official explanation for that is that they don't want Death Knights to ever be level 1 (they want them cool from the start), but considering that the expansion will also bring 10 more levels into the mix, it's a lot to ask players who've already reached level 80 to roll a new character and do it again.
Keen actually says it drains a little bit of the fun out of the game for him, but of course, each player is different-- some people "beat" the game once by reaching the highest level, and don't really want to do it again. And while his concerns that instant leveling makes ghost towns out of lowbie areas are valid to a point, the easy fix for that is to add content to those lowbie areas that players want to play. Players who really enjoy the leveling experience won't use the command when there's new content to be played.
There should definitely be fairly harsh prerequisites for any instant leveling-- skipping parts of the game should never be done lightly (and if players do want to literally skip parts of your game for free, odds are your game isn't good enough). But in the right situations, advancing starting (or, more likely, restarting) players to a higher level can have great benefits for all involved.